UPA@3: A trillion-$ triumph hit by inflation

BusinessStandard Reporters in New Delhi/Mumbai | May 23, 2007
Baiscally this article talks about the UPA govt. 3 year achievements:
Last October, when Finance Minister P Chidambaram delivered a lecture at Stanford University.
He highlighted the National Rural Employment Guarantee Act, which aims to provide one job per family for 100 days every year, as a key achievement of the UPA government.

One of the six basic principles of the programme was to ensure that the economy grew at least 7-8 per cent per year in a sustained manner over a decade and more.

The finance minister's Stanford address also said that India's economic growth had been accompanied by a benign rate of inflation. That statement was made only six months back.

Perhaps the finance minister could not have then foreseen that this 'benign rate' would suddenly morph into a runaway spiral, putting into question the very ability of this coalition government to manage growth.

By January this year, the Reserve Bank of India said it was witnessing early warning signals emanating from rising inflation in an environment of high money and credit growth.

The causes are symptomatic with the UPA's failure to get going on the infrastructure front -- a key bottleneck as well as its inability to push agriculture growth, which slowed down from 6 per cent in 2005-06 to 2.7 per cent the year after. These factors coupled with escalating asset prices have raised dangers of the economy overheating.

Too much of unfinished task

Prices hurt where it pains the most

Prices of agricultural commodities saw a sharp rise in the three years of the UPA rule primarily due to stagnating production and rising demand. Commodities like pulses, wheat, milk and edible oils have seen a jump of 40-100 per cent over the period, thereby contributing to overall inflation.

Markets happy but small investors worry
Foreign investors have pumped in over $27 billion in Indian equities during the UPA's tenure. ( read 3 yeras)

Ironically, the UPA is reaping the rewards of the seeds of the economic growth planted by the previous government of the National Democratic Alliance. But it does deserve credit for keeping the India story alive.

However, the UPA has done little to bring in more retail or small investors except allowing the Securities & Exchange Board of India, the markets regulator, to function without interference from New Delhi.

Social sector: Highlights and woes
he centerpiece of the CMP commitments on education -- the Right to Education Bill -- is still pending. The Centre sent it to the states, seeking a broader consensus. But educationists say the Centre is merely trying to evade its responsibility.

The most important initiative of the UPA government in the social sector is the National Rural Employment Guarantee Scheme (NREGS). It was launched in February 2006, and by December 2007, will have covered more than 1.4 crore (14 million) households in 200 districts of the country.

But the scheme becomes suspect instantly, because in its outcome budget, the Ministry of Rural Development, while claiming that 3.47 crore (34.7 million) job cards had been issued and employment provided to 1.51 crore (Rs 15.1 million) households, said that in some cases, the targets for providing employment had been exceeded.

With great fanfare, the government also launched a massive public-private partnership deal called Bharat Nirman that envisaged providing infrastructural amenities with the collaboration of the private sector. But in most cases, the government has fallen short of reaching targets. Till December 2006, drinking water was provided to 55,512 habitations as against the target of 73,120 habitations.

Power shortage plagues
While the performance of the Manmohan Singh government in the power sector has been dismal -- just about 50 per cent of the targeted 41,000 Mw was added in the 10th Plan period -- it can take credit for prying open the nuclear door for India.

There was the plan to set up the country's largest power plants -- the 4,000 Mw ultra mega power plants -- across nine cities in the country but only one at Mundra in Gujarat has managed to get off the ground so far. Critics say the government would have done better by focusing incentives on smaller-sized plants since "not many companies have the ability and willingness to invest Rs 16,000 crore (Rs 160 billion) or more required for each ultra mega project."